When goods are returned from the consumers due to faulty quality or not as per the conditions of sale, it is called sales return or returns inward. To find out net sales, sales return is deducted from overall sales. That means when a customer is not pleased with a product and expects to obtain the full amount paid for the product. For the consumer, this results in the following accounting transaction: A debit (reduction) of accounts payable. A credit (reduction) of purchased inventory.

A sales return is an alteration to sales that arises from definite return by a consumer of merchandise he/she before bought from the company. It is usually recorded under the account “Sales Returns and Allowances”. Returns inwards or Sales Return are goods returned to the selling entity by the customer, such as for warranty claims or outright returns of goods for a credit.